The time for Canadian LNG

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By: Justin Mogck & Sonia Rudolf

LNG export is a promising driver for the continued feasibility of natural gas production and development in Canada. With the increase in global demand for natural gas, especially in Asia, and the recent decline in foreign gas demand from the U.S., Canada needs to diversify its market access by developing its own LNG export facilities in order to capitalize on global natural gas prices.

The Canadian natural gas industry is well positioned to be a major global player in LNG projects as Canadian natural gas is responsibly developed and enjoys advantages such as:

  • Supply Cost: With abundant natural gas reserves and best-in-class technologies, Canada produces natural gas with low supply cost, resulting in higher potential margins and associated royalty revenues if our gas prices were more aligned with international markets.
  • Proximity: Canada can access both the growing Asian markets via our West Coast LNG projects as well as European markets through East Coast projects. Asian demand alone is anticipated to account for over half of the global natural gas demand growth over the next 5 years.
  • Environmental Consideration: Canada has the potential to produce LNG with the lowest GHG emissions in the world. LNG from BC would take advantage of their renewable sourced power supply – largely hydro – to supply the energy requirements necessary for production. Additionally, Canada’s cooler climate in comparison to other major LNG exporting countries contributes to lower GHG emissions from the liquefaction process. In addition to this, Canadian oil and gas producers have successfully implemented stringent environmental performance strategies for decades to reduce their emissions and minimize the environmental impact.
  • Human Rights: Canada has the highest standards for human rights among the top global natural gas producers. With the increased focus on human rights considerations, Canada is best positioned to provide responsibly produced LNG globally.

The major challenge that LNG development in Canada faces are the regulatory and political hurdles which have recently caused billions of dollars worth of investment to be pulled out of Canada. One such example is Berkshire Hathaway’s decision to pull a $4-billion investment in the Énergie Saguenay LNG project citing “current political context”.

Key Canadian LNG Projects

According to Natural Resources Canada, eighteen LNG export facilities have been proposed in Canada with a total capacity of 29 Bcf/d. Currently, only one; LNG Canada, is under construction. The $40 Billion project’s first phase is expected to be completed by 2025 and will have 1.9 Bcf/d export capacity initially, increasing to 3.7 Bcf/d in subsequent years. This project will be the first to open the door to global markets for the Canadian gas industry. Other promising LNG projects in varying stages of the planning process include:

  • Kitimat LNG – capacity of 1.3 bcf/d – FID anticipated in 2023 – onstream est. 2029
  • Woodfibre LNG – capacity of 0.3 bcf/d – construction anticipated mid 2021 – onstream est. 2023
  • Goldboro LNG – capacity of 0.7-1.4 bcf/d – FID likely delayed into 2021 – onstream est. 2025

Canada’s Opportunity

The importance of natural gas will grow as countries that rely largely on coal shift towards cleaner options for their energy needs. This the shift in the U.S. away from coal in favor of Natural Gas consumption is apparent in the chart below, with natural gas consumption now outpacing coal.

The time for Canadian LNG

The past decade has seen exponential growth of LNG exports; but while countries like Australia, Qatar and the U.S. have become major players in the LNG export market, Canada has largely missed out thus far due to regulatory hurdles and hold-ups. Given that global gas demand growth is set to continue over the next couple of decades, Canada needs to take advantage of this expanding opportunity and move ahead with other LNG projects such as Kitimat, Woodfibre and Goldboro in addition to the LNG Canada project. Locally, these projects will create prosperity for the entire nation by contributing to the economy through jobs, tax revenues, and increased royalty payments to both provincial and federal governments.

The impact of energy production and consumption (including coal, fossil fuels, renewables and nuclear) on the environment is undeniable. As the world’s population continues to grow and countries continue to develop, the demand for all types of energy will inevitably increase. Canada is not only presented with an opportunity to deliver our natural resources to the greater global economy, but we have a responsibility to be an active participant and role model given our abundant resources and the high standards we hold ourselves to in the development of those resources.

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